Why can't (or shouldn't) economists answer normative questions?

Question

Normative questions are those which:

affirm how things should or ought to be, how to value them, which things are good or bad, which actions are right or wrong. Normative is usually contrasted with positive (i.e. descriptive, explanatory, or constative) claims when describing types of theories, beliefs, or propositions. Positive statements are factual statements that attempt to describe reality.

Normative questions may include:

• What is the right amount of money to spend on healthcare?
• How do we reduce the unfairness of income inequality?
• Is it better for the few to sacrifice for the many?

The main reason that economists (and this site) steer clear of normative questions is that they are difficult to answer in a way that has academic rigour. Experienced philosphers and economists will usually attempt to rephrase any question so that it is positive so that an answer can be arrived at and research conducted.

People tend to think normatively, though. Things can feel "right" or "wrong".

My question: is there a clear and decisive answer (or research) to the question as to why it is difficult (or even irresponsible) for economists to answer normative questions and, by extension, is it possible to use normative questions to arrive at a positive result?

Answer 1

First, it is worth noting that much of what we call "positive economics" is based on weak ethical considerations, namely Pareto improvements.

But, Pareto gets in the way whenever a policy would harm one group (or individual) in order to benefit others (that is, most policies). We cannot compare utility across people--we have no basis for saying, for example, that imposing a small dis-utility on one individual while improving the utility of thousands of others is an improvement. (There is the notion of "Kaldor-Hicks efficiency" (aka potential Pareto improvements), but that is controversial in itself.)

The utilitarians (J.S. Mill, Behtham) posited that economics should seek to maximize overall utility of a group or society. I'll leave the philosophical debate to the welfare economists, but in practice we cannot know what the social welfare function (SWF) of a society is. Thus, even if our philosophy dictated that we switch to a utilitarian economics, it is difficult to see how we would go about it. (That said, we use the concept of Benthamite utility functions quite often in theoretical work.) This leaves us, again, with Pareto's criterion for applied work.

But, economics does have much to say about normative questions. Many applied economists draw a sharp distinction between policy and economics. Namely, while in many cases, we cannot propose a particular goal (e.g. increasing health funding), we can analyze the impacts of such policies. Using the healthcare spending example, an economist would be unable to answer the question of "should we increase healthcare spending." We can, however, give some insights into the impacts of various mechanisms for increasing spending, and perhaps even rank various ways of achieving a goal.

Economics is not alone in this regard. An engineer, for example, can propose ways of reducing energy usage, but which technology bundle is ultimately adopted is a matter of economics and policy. Similarly, economists can comment on the various impacts (potential inefficiencies, distortions...) of policies, but in many cases cannot say which one to adopt.

A classic example is the free trade debate. Almost all economic models show an overall gain from trade (and, indeed, usually potential Pareto improvements, depending on the policy), but the same models also tell us that some are harmed by many trade policies (be it liberalization or restriction). Asked whether trade liberalization is a good thing, many economists would answer "for whom?" and "it depends." Asked whether trade policy X is good for consumers in country Y, a more concrete answer would be offered.

So, normative questions can most certainly be answered if the policy goals (ethical criteria) are stated explicitly. This sharp distinction between economics and policy seems to be less-clear to non-economists, and that leads to many misunderstandings of what economists do, and what sorts of questions economics can answer.

Answer 2

Economists often get involved in answering normative questions, otherwise they'd never comment on government policy. Many of the failings in economic models have been attributed to rational-agent theory (or Homo economicus) who is able to think clearly and logically about any information since he has the benefit of perfect information and perfect insight. This has fallen out of fashion.

Herbert Simon in Models of Man (1957) presented the idea of bounded rationality:

the idea that in decision making, rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision

Bounded rationality is the reason people can't see why they disagree. They start from a different understanding and different premises. This leads them to make normative statements based on the way they perceive the information at their disposal. This is the classic "talking past each other" aspect of many normative debates.

These are important considerations in looking at normative questions. The implications are that:

1. People assess information based on the limitations of their existing knowledge, capacity for learning, and time available for reflection;
2. If the opportunity cost (the cost of any activity measured in terms of the value of the best alternative that is not chosen) of investigating alternatives is too high then they will be ignored;
3. Selection bias can then be used to justify the chosen course of action (and Ars Technica has a very detailed article on the various forms of selection bias used in arguments).

More recently Ariel Rubinstein put a mathematical model behind bounded rationality in Modeling Bounded Rationality (1998) and available on the web for download.

Unless great care is taken, normative questions and statements are almost inevitable. However, if a person - of whatever political or social orientation - enters a discussion with an open mind (especially open to the idea that they may be expressing a normative bias) then such normative opinions become a valuable part of any economic investigation.

If it emerges from discussion that a disagreement is based on a normative opinion then it is likely that no immediate agreement can be reached until a factual statement of the problem can be agreed. However, if the disagreement is based on a positive framing of the problem, then we may be able to model that problem and find a solution.

As a recent example of how normative bias can undermine positive discussion, consider the recent walkout of Econ 10 students from a Harvard first-year economics class. They have mistaken normative questions as being critical to learning theory in economics.

Answer 3

Short answer: Of course you can make normative statements - you just need to be upfront about what your ethical standpoint is. Having said that, results which are true for all reasonable normative standpoints get pride of place due to their greater generality.\

By the way, all of social choice theory is devoted to normative issues - and Amartya Sen got a Nobel Prize for it. So there certainly is a lot of attention paid to the field.

Answer 4

The history of the precept that the normative is forbidden is given in The Positive-Normative Dichotomy and Economics (Wade Hands, 2009). I try to summarize some of it:

While earlier economists (e.g. J.N. Keynes) had distinguished between the positive and normative, they did not prohibit the latter. This only happened with the rise of logical positivism, according to which:

there were only two types of meaningful discourse — empirical science (synthetic knowledge) and logic/mathematics (analytic knowledge) — everything else was meaningless metaphysics. Since normative economics was based on presuppositions that were not derived from either of these two sources, normative economic science ceased to be any type of science at all, and was relegated to the epistemic dustbin along with religion, metaphysics, and other “meaningless” discourse. This positivist view of the normative was often combined with an emotivist view of ethics — that ethical statements were simply expression of attitude or emotion.

Lionel Robbins (1935) was probably the first prominent economist to forbid discussion of the normative from economics (or "economic science"). His view came to be endorsed by many prominent economists (notably Milton Friedman, 1953). By the mid-20th century, this became the conventional wisdom.

Hands goes on to argue that on this matter, there is a sharp divergence between economists' rhetoric (or self-perception) and their actual practice.

As for why today's economists persist in believing that they do not and should not talk about the normative, my own speculative view is that this belief helps to assure the insecure profession that what they are doing is on par with "real science".